4-1 Aegis Equities Research/ "Listed Managed Investments Review

November 2004, pp 3-13

Measuredby Performance

Usted Hanaged investments Review August zuu^

TTiere are at least 50 Listed Investment Companies (LJCs), Exchange Traded Funds (ETTs)and other investment funds listed on the Australian Stock Exchange. These companiesconstitute the Listed Managed Investments sector (LMIs).

The LMI sector fs approximately $10B in market capitalisation. It is 'top heavy', with thelargest LJC, AustraHan Foundation Investment Company Limited (AH), being approximately$3B in size and the largest 10 LMIs being approximately 80% of the sector.

It Is a sector that has attracted much greater investor focus in the last 18 months, but if: isalso Important to understand that many of the largest LMIs have been listed for a significantperiod of time.

This is our first review of the IMI sector. In what wilt become a quarteriy product. We have18 partJdpaUng LWXs that have commissioned us to provide a 2 page profile and rating ofthem. We have a further 37 LMIs on which we provide a I page profile. Ourrecommendations are provided in Figure 1.

Rg 1. Recomnnendations

Usted Managed Investment

AFICLtdAberdeen Leaders Ltd

BenUey International Ltd

Coionia) First State Private Capital Ltd

Djemwarrh Investments Uri

GEC Asian Value FundGEC Austratfan Healthcare Fund

Mtiton Corporation Ltd

Mirrabooka Investments Ltd

streetTradcs S&P/ASX 200 Usted f^operty FundstreetTracks S&P/ASX 200Syivastate LtdTempleton Global Growth Fund LtdWallace Absolute Return Ltd

WAM Capital LtdWhitefietd Ltd *°-

Wilson Investment Fund Ltd

Wilson Investments Taurine Rjnd Lfat

Source: Aegis

ASKCode

AHALRBELCFI

D3WGCAGCHMLTMIRSLF

STWSYL

TGGWABw/wWHFWILwrr

AegisRecommendation

BuyHoklHoldBuy

HokiHotdHoldBuyBuyBuyBuy

HaktBuy

HoldHoldHok)Hold

The LMI sector prior to the 1990sMany of the largest LlCs, such as AFl/ have been listed for decades. Ttieir company holdingshave often also been !n place for decades, and they are amongst the largest and most stableshareholders in many Australian companies' share registers.

The "older" LJCs approach investment management in a different way to institutional fundsmanagers:

B Time frame. As funds under management is not affected by Investor movements andshort term (say monthly or quarteriy) performance is not widely tracked and used as thebasis of decision making, LJCs generally do not focus on their short term performance.

8 A focus on yield. Investors in older LICs tend to be retirees and others who seek a taxeffective and stable income stream. Often, companies are only sold if Vhere is a dearthreat to the ongoing ability of the company to pay a growing dividend stream.

B A tendency to have conservative portfolios with a value bias. This is confirmed byperformance analytics - most tend to outperform in negative markets, and underperfumiin posftive markets. They also tend to have low betas (they do not take on a high degree

page 3 of 100 Copyright © 2004 by Aegis Equities Hokllngs Pty Umited. Ati Righte Reserved.

Listed Managed InvesSmenEs Review August 2004Measuredby Performance

of market risk}^ a characteristic which tends to be associated with value management.

a Exposure to banking sector. To illustrate these characteristics, many older LICs have verylarge holdings in the banks, and virtually no holding In stocks such as News Corporah'onLtd (NCP). Cfeariy, this is one of ?e reasons that these UCs have tended to perform well/particularly since the mid 1990s, while being one of the primary reasons for the generalunderperformance over the past year The current debate regarding the ability of banksto continue to grow earnings and dividends on an ongoing basis is important to UCs as aresuit. The general consensus at the moment by the UCs is that there is perhaps someover'reaction in markets and most are confident that banks will continue to provide goodlevels of franked dividends in the medium to long term. In contrast, some fund managersmay be trimming holdings as shorter-term wealmess will impact returns in the shorterterm.

s Infcematised management A key feature of older UCs is that most rely on an intemalisedmanagement structure. This, combined with the long-term investment time frame and lowturnover of stocks, results in very low managemenfc expense ratios.

Changing industry dynamicsAt: periods during the 1990s retail investors witnessed a consistency of outperformance fromthe LMI sector during periods of poor investor returns resulting from equity bear markets andtranslating to underperforming instituUonat ftrftds managers.

In the late '90s and eariy 2000s, consolidation within institutional funds management:resulted in a large concentration of retail funds under a small number of managers. Funds'concentration diminished the potential for market outperformance, as institutions became toobig to take meaningful stock positions that could impact performance. This resulted in a shifttowards index investing and significant decreases in the average backing errors of fundmanagers.

These changing industry dynamics have been the catalyst for the recent re-emergence of theLMI sector. Equally, a number of investment management boutiques have been set up overthe past few years using LMI as a cost effective and speedy mettiod for these boutiques togather funds under management directfy from advisers and investors,

Reasons behind the re-emergence

From an Investor's perspective:

a LMIs have provided retail investors with direct access to reputable invesbraent managerswi? differing styles and in some cases specialist investment mandates (for exampleresources/ healtticare and international equities exposure).

As mentioned above, smaller LMIs' size and active management style provides increasedopportunity over index players. LMIs allow managers the ability to take on more risk intheir portfolios, run more concentrated portfolios and not pay as much heed to the index.The average tracking error of an LMI's underlying performance (as opposed to share priceperformance) is higher than the average managed fund.

From an investment manager's perspective:

3 LMIs offer managers certainty of cash flows when investing.

s Many LMI offerors have been able to lock in fees in line with retail products, while notneeding to provide the same infrasbncture as most retail investment funds. Others havelocked in lucrative performance fees. This means that they can generate strong profitmargins on the funds under management

The ASX has recenUy allowed managers to offer UCs with 25-year managementcontracts, thus ensuring an annuity style income for the UC offeror. Although tftisprovides the UC manager with certainty of tenure, investors have little ability to takeaction if a manager is underperforming and cannot effectively lobby for wind up in LICsthat are trading at significant discounts. These new contracts act to empower the LICmanager, at the expense of the LJC investor.

page 4 of 100 Copyright: © 2004 by Aegis Equities Holdings Pty Limited, AH Righis Reserved.

U'sted Managed Snvestmeitts Review August 2004Measuredby Performance

Market outlookThe floats carried out during 2003 were generally completed easily, raising $18. LMIs thatcame to market towards the end of 2003 found it more difficult to raise their minimuminvestment amounfcs, with some extending their oflter period and some withdrawing theirproducts altogether. This has continued into 2004, with only those that offered investorsspecialist investment exposure such as smali cap, resources, Infcemational equities raisingsignificant funds easily.

As a result, going forward it is quite likely that LWIs may be more aggressive (in terms ofmeasures such as tracking error) to gain some uniqueness in the sector. They may also offera variety of styles and may not be as focused on the income needs of their investors.

The combination of high few, performance fees and long management contracts has led tosignificant criticism of the newer LMIs. Aegis believes that investors will accept higher fees ifthe newer LMIs provide good returns, commensurate with the risk being taken. Nonetheless/we do believe that it is important to monitor the total level of fees being charged andacknowledge ?e stark difference in fees between the older and newer LMIs.

There are a number of proposed LMIs that have delayed their launch due to the fallinginterest in the sector. If investor sentiment was to reverse, we may see a number of those •floats come to the market.

However, iE is also possible that the sector may undergo a period of rationalisation, similar tothat experienced over the last couple of years in the Listed Property Trusts sector. This mayoccur for a number of reasons, perhaps the most likely being a lack of scale in some of thesmaller LMIs. An indication of this occurring Is the recent announcement (9 August 2004) byBrickworks Investment Company Ltd (BKI) and Pacific Sb-ategic Investments ltd (PSI) oftheir intenUon to merge.

In summary, the game for LMIs has changed. LMls can no longer be stereotyped asconservative investment vehicles. They provide a variety of targeted investment specialtiesfor investors and access to reputable investment managers pracUctng acUve managementtechniques. Equally, they provide attractive operating structures for investment managers,

Shareholder ReturnsFigure 2 below shows the 12-month total return for the 18 LMIs that we provide detailedcoverage of in this report. White performance has been mixed across the sector, the marketweighted average displays a relatively modest return given the share price performance ofthe older, traditional U€s. This reflects a reduction in the premium to NTA.

Hg 2.12 Month Performance

Haifcet cap weighted avenga

WIT

wnWHF

WAM

WMTGG

sn.

sfWStfHtT

HWGCHGCAoiw

CTI

Source: Aegis

(BB- based on past gross performance of BGL wNeft has no correlation wSh the future perfbnnance of the company under the newtnvestmwt management of Conateftatioo and Hielmpfementalton of the interTiatioiwtctmtponeot of the H<KneGtoE>at°I strategy.)

As with other forms of managed investments, the risk remains that the Investments aremanaged poorly. However, we believe that the sector provides a formidable competitor to theb-aditional managed funds industry that will continue to develop its offerings and attractionfor investors over time.

page 5 of 1QQ Copyright © 2004 by Aegis EquIUes Holdings Pty Umifced. Alt Rights Reserved.

Measuredby Performance

Listed Managed Investments Review August 2004

There are a numerous ways of measuring the performance of LMIs. However, from theinvestor's perspective/ the most transparent measure is total return as measured by shareprice performance and dividends, which we have set out in Figure 2.

However this measure does not necessarily show performance in the LMI's undertyingportfolios, due to expansion and contraction of the share price premium or discount to post-taxWTA.

Figure 3 illustrates the premium or discount that Uie fargest 10 UMIs on the ASX, weighted ona market capitatisation basis, traded at on a monthly basis for the last 5 years. Given theselargest 10 LMIs represent just under 80% of the total market capifcalisaUon, Aegis befievesthe above graphs provide an accurate representation of trading in the sector as a whole.

The sector has traditionally traded within 10% of NTA. During 2003, the sector began totrade at a very high premium. Many LMIs, particutariy ?e largest and more established IMIs,have a value bias. They generally performed well during the value period of 2000-2. Thedisappointing performance of many popular and widely used unit busts led to somediscontent amongst investors and advisers using those structures. As a result, there mayhave been some switching from unit tmsts to LJCs during that period, pushing up thepremium. The decline in premium represents^ return to more normaf levels and perhaps alsoreflects a tendency of value-based managers to underperform in a rising market.

Fig 3. Premium/discount of LICs - market weighted

20%

Jiat-39

Source: Aegis

AprflO FeM>1

IPrwi/<Ofsc)tuNTA-RHS

Dec-OT Oct-02 Aug-03

•SharePrice-LHS - - - -NTA(posttax)-LHS

Gross Performance

In order to remove the impart of changes in the dlscount/premium and obtain a view of theunderlying performance of each LMI, we have calculated a measure of gross performance.Gross performance is (tie investment earnings of the LMI before fees and taxation. If grossperformance was not available we have used the LMX's pre-tax MTA performance, withdividends reinvested. While gross performance provides a better measure of how theunderlying assets have performed/ and hence how well the manager has performed, overallreturns are determined by movement in ttie share price of the LML

Rgure 4 shows the 12-month LMI gross performance. The strong positive returns are areflection of the solid recovery in equity markets over that time and contrasts with the actualshare price performance of many of the older UCs that saw a reduction in the share pricepremium. With the premium now closer to its long-term average, our view is that the shareprice performance of the LMIs over ?e next 12 months is more likely to reflect theunderiying performance of the funds. Although, differences in tax structure and managementfee structures will also create divergences between gross perttomiance and the share price.

page 6 of 100 Copyright © 2004 by Aegis Equities Holdings Pty Limited. All Rights Reserved.

Measuredby Performance

Listed Managed Investments Review August 2004

In appendix 4.2 we provide some more detailed performance analytics, includingperformance measures over longer time frames.

o June 30,

Return

16.2%

20.1%

14.1%

0.6%

20.4%

20.7%17.9%

9.5%21.6%

13.1%

26.1%

9.9%

27.7%

18.4%

20.3%19.6%*

21.7%

21.6%

2004

Excess Return

-5.5%

-0.6%

-4.1%

-19.4%-0.4%

-8.1%

-4.5%

0.7%

0.0%-8.5%

5.8%-12.5%

5.3%-3.2%

-2.1%

-2.7%*

0.0%

TE2.5%

3.5%

8.2%

7.0%

4.4%

6.4%

4.5%

0.5%

0.0%

6.4%

1.9%

9.0%

7.0%

2,6%3.7%

4.1{&*

1.8%

IR-217.0%

-62.0%

-18.0%

-277.0%

-8.0%

-128.0%

-101.0%

149.0%

2.0% :

"132.0%

312,0%-139.0%

76.0%

-122.0%

-56.0%-0.8%*

0.0%

AHALRBELCFID3WMIRMLTSLFSTWSYLTGGWABWAMWHFWTTAverage Aust EQ LMIMedian Aust Eq Fund

S&P/ASX200

Source: Aegis, Mercer Investment Anatydcs *exdudes BEL, CFI, SLF, TGG and WAB.

Note: GCA, GCH and WU. had not been operating for 12 months to 30 June 2(?t.

Porfcfotio StructureFigure 5 below shows the average Price Earnings Ratio, Dividend Yield and EPS growth of thetop 10 stocks held within each LMI's portfolio based on 2005 Aegis forecasts. The table alsoshows the weighting of the top 10 stocks in the portfolios.

We have been able to include all infbmiaSon on the 14 LMIs that invest in listed Australianequities, but we are unable to derive such information for asset classes such as private equity(CFI) and international equity (BEL, GCA,TGG).

v^-

Fig 5, LMI portfolio statistics

AHAtR03WGCHHIRHLTSLFSTWSYLWABWAMWHFWILwrrAverageS&P/ASX200

Source; Aegis

<%)45.4

57.1

59.5

76.1

37.6

50.4

80.744.8

68.3

N/A39.0

58.2

71.1

53.7

58.0

P/EOO12.2

12.413.0

21.411.5

12.1

13.4

13.3

11.5

12.0

11.2

13.8

16.8

11.9

13.4

13.6

Yield (%) EPS <4.94.0

3.9-2.6

4.0

6.0

7.03.9

4.0

4.7

5.3

4.5

4.0

5.2

4.6

4.2

;rowth(<%>)16.88.7

22.3

16.1

7.1

8.9

2.518.0

8.7

15.611.8

10.6

9.5i6.a

12.0

13.9

page 7 of 100 Copyright © 2004 by Aegis Equities Holdings Pty Limited. All Rights Reserved. |

Listed Managed Investments Review August 2004

by Performance

On average, the stocks within the portfolios of the LMI's highlighted in our review have a PEof 12.6 times/ compared with 13.6 times for the S&P/ASX 200 Index. Yield is higher thanexpected from the index and earnings per share growth is lower than expected from theindex at 12.3% versus 16.9%. This tends to highlight the overall value bias of the sector.

It is interesting to note that there is not a significant degree of variation in the portfofios; thePE ratios of all LMIs sit between 11.2 and 13.8 times. The exceptions to this are GCH andWAM, which have PEs of 2X.4 and 16.8 times, significanUy higher than other portfolios. GivenWAM's growth bias, this is within our expectations. GCH invests in healthcare stocks, whichis tradiEionally a sector that trades at high PE ratios, so this is again wiEhin expectations,

Yields vary more widely, at between 3.9% and 7.0%. Many IMJs, particularly the moreestablished LMIs such as AFI,, MLT, SYt. and WHT target high yields, and often hold significantpositions in the banks as a result. DJW also aims to provide investors with a strong yield, butwill do so through generating income using buy/write strategies.

Earnings per share growth varies signtRcantly, with a low 2.5% from STW (w?hich replicatesthe S&P/ASX20D Property Trust Index) to 22.3% for DJW. DJW has signiRcanl: exposure toresources/ which have high expected earnings growth.

page 8 of 100 Copyright © 2004 by Aegis Equities Holdings Pty Limited. All Rights Reserved.

Listed ISanaged Investments Review August 2004Measuredb/Performance

In the following section we present a 2-page summary for each of the LMIs that hascommissioned us to rate them. The LMIs covered by this report and their marketcapitalization as at 30 June appear betow, and represent approximately 60% of the sector.

For the LMIs covered In our 2 page summaries, we have provided a recommendation(BUY/HOLD/SELL), key financial information, a dMdend yield history, a short summary ofphilosophy, style and process and summary portfolio information.

We have also provided 1-page brief summaries on LMIs that have chosen not to be rated byAegis at this time. Each of these profiles contains publidy available infonmah'on and, whereprovided, Infonnation supplied by the relevant LHI. However, we do not providerecommendations on these LMIs.

Recommendation System

Aegis has developed and uses a comprehensive template by which we grade LMIs. In broadterms, we consider and score the following areas:

Management and Investment Team

s Investment Philosophy, Style and Process

B Performance and Performance Analytics

Structure Vatuation

B Dlscount/Premium to WTA

Our Recommendations

Fig 6. Recommendations

Listed Managed Investment Code

AFIC Ltd , API Buy 10

Aberdeen Leaders Ltd ALR Hokt 12

BenUey IntemaHonal Ltd ^ BEL Hold 14

Colonial First State Private Capita) Ltd CFI Buy 16

Djerriwarrh Investments Ltd DJW HoM 18

GEC Asian Value Fund GCA Hokf 20

GEC Australian Heafthcare Fund GCH Hold 22

Milton Corporation ltd MLT Buy 26

Hirrabooka Investments Ltd MIR Buy 24

streefeTracks S&P/ASX 200 Usted Property Fund SLF Buy 28

streetTracks S&P/ASX 200 STW Buy 30

Sylvastate Ud SYL HaM 32

Tempteton Global Growth Fund Ltd TGG Buy 34

WaSlsce Absolute Return Uri WAB Hold 36

WAM Capital Ltd WAM HoM 38

Whitefield Ltd WHF Hold 40

Witson Investment Fund Ltd WIL HoM 42

WIIson Investments Taurine Fund Ltd WH Buy 44

Source: Aegis

page 9 of 100 Copyright © 2004 by Aegis Equities Holdings Pty Umited. All Rights Reserved-

Measuredby Performance

Usted Managed Investments Review August 2004

AFIC Ltd (AFI)iuwfsrutw (OBMBT

LNI TypeListed Investment Company

Investment Assets

Usted Companies

Investment Area

Australia

Investment Sectors

Diversified

Company DetailsAustralian Foundation Investment Company Ltd (AFI) was established inX928 as Uie Were Investment Trust and was listed in 1936. AFIC fs nowthe largest UC in Australia/ representing around 30% of the sector. Thecompany holds around 100 listed Australian companies, mainly within theS&P/ASX 200. AHC'has about 75,000 shareholders and is active incorporate governance, and wfll generally vote on corporate resolutions.

Board

B Teele (Chairman), D Argus, R Barker, T Campbell, M Neil, .1 Patterson,F Ryan, S Wallis, C WalEer.

Investment Philosophy ''

AFIC's philosophy is one of 'buying and holding' good companies for thelong term, in order to benefit from a growing stream of franked dividendsand capital growth.

Style and ProcessAFIC's style is characterized as a bottom-up, index unaware, 'buy andhold* value based style. The portfbfio is split into two areas: a long-terminvestment portfolio and a small trading portfolio consisting of between0%-10% of the total portfolio. Within the long-term portfolio, ARC preferto buy companies with strong management/ good free cash flow, strongsustainable margins and a capacity to pay increasing dividends. Inidentifying and analyzing companies, AFIC use external brokers for adegree of their modeling, and will concenb^te on spending time withmanagement, particularly CEOs and seeking the opinion of its investmentcommittee (a sub-committee of the board) at weekly investmentmeetings. Most sales are due EG takeovers or other corporate actions.Within the trading portfolio, the manager will use option strategies inorder to generate additional income.

Investment Team

Bruce Teele, B.Sc B.Oimm, Oiairman. Bruce has been AFIC Chairmansince 1984 and board member since 1966. He has 45 years experience inbroking/investment Industry.

Ross Barker, B.Sc (Hon), MBA, GradDip SIA, Managing Director. Ross has24 years experience in brofdng/fnves&nent industry.

Mark Freeman, B.Comm, MBA^ ASIA, Investment Manager. Mark has tenyears investment experience, all with KFIC/D3W.

Biil Forde/ B.Comm, CTA/ Assistant Investment Manager. BilH has fouryears investment: experience, all with AFIC/DJW.

Aegis CommentsARC offers investors a good core or value biased Australian equitiesexposure. It has a long-term history of outperforrnance of ttieS&P/ASX200 Index. The portfolio has ynderperfonned over the past year,during a time when markets have focused on growth and small caps. Itsfocus on drvidends and dividend growth means it is suitable forconservative investors, who require a tax effective income stream.

Key investment information

RATING BUY

Price {$} $3.32

NTA tax adj. ($/share) $3.11

Market Cap ($m) 2,981.4

Fully Diluted Shares (m) 898,0

Turnover ($M pa) 211.2

12 month l/H ($) 3.20 - 3.69

Usting Date 1936

Management Expense Ratio (MER)

Base Case HER* (%) 0.16

HER 5% Outperf.* (%) 0.16

* Assumes 10%retum for All Ords, 6% far Bonds.

Performance Anatytics

sap/Asx200 Ace All Ords Ace

IVr 3Yr IVr 3Yr(pa) "' (pa)

Bccess Perf.(%) -S.45 2,22 -6.21 1.71

Beta 0.74 0.80 0.70 0.79

7E(%) 2.51 3.86 2.97 4.01

IR -2.17 O.S7 -2.09 0.43

Substantial shareholders (%)

No substanUal shareholders have been notifiedtoASX

above tfrformatton as at 38 June 2004

Dividend Yield (<%>}

FV02 FY03 FY04

4.3ff 4.3ff 4.3ff

Dividend yield on share price

Company Contact

Geoff Drivergdriver@afl .com.su

61 3 9679 1659

www.afi.com .a u

page 10 of 100 Copyright © 2004 by Aegis Equities Holdings Pty Umited. All Rights Reserved.

Measuredby Performance

Listed Managed Investments Review August 2004

Sector

Finsndats

Industry Group

Diversified Hnandafs

Industry

Diversified Financial Services

Sub Industry

MulU-Sedbor Holdings

Asset Weighting

Aust. Equities 100%

Srae Weighting (Equities)

Mid Small Hlcro7%-\ 0% / 2%

Sector Weighting (Equities)

Energy & industriaEsUttllUes "°<>

TelcoBi 3%IT 6%

Materials19%

abova informaUon as at 30 June 2004

Other Data

Options:

Divklend policy:

Capital managementpolicy:

UC tax concessions?

DRP available:

None on Issue.

To pay out all recehred dh/idends, so that over time thedivhlend stream will grow faster than the inflation rate.

The company has a share buy-back arrangement inplace to provide flexibility if the shares trade at adiscount to NTA. AFIC also raises capital through itsShare Acquisition Plan.

Yes.

Yes, at current market price.

AFTs Portfolio (Top 10)Weigh

PcrtfblfoCode

CBAWBCNABWESBHPTLSANZTOLAMCCML

Tax B^sedHnandats

-K Prop45% V-

No Tax (0%)

(%)7.6

6.9

6,8

4.8

4.4

3.9

3.3

2.9

2.4

2,4

45.A

ting

S&P/ASX200 C?)

6.1

4.6

6.7

1.7

7.0

4.6

4.9

0.4

0.9

1.5

38^i

Returns

Super Fund (15%)Aware* (30%)Max Tax Rate (48.5%)

Fund

IVr

2.7%

1.8%

0.7%

-0.2%

2005 Aegis ForecastsiForecasts Pre m/Disc

P/K Yield EPSGrtb to Aegis(X)11.9

11.0

12.5

16.0

12.5

13.7

10.7

18.3

10.2

17.2

12.2

3Vr+ IVr

6.5% 23.2%

5.7% 22,2%

4.7% 21.1%

3.8% 20.1%

(%)6.1

5.6

6.3

5.5

1.9

5.7

6.1

2.4

5.5

3.7

4.9

(%) target (%)24.0 -L4

10.2 -18.1

-3.2 5.5

10.2 -3.4

53.1 -9.2

6.7 -6,8

6,9 -13.5

10.2 -15.2

12.9 -23.4

13,8 3,4

16.8Portfotto as at 30 June 2004

S&P/ASXZOOSX 2003Vr+

5.7%

5.0%

4.0%

3.2%

AIIOnteAcc.

IVr 3Vr+

23.9% 6.2%

23.0% 5.4%

21.9% 4.5%

20.9% 3.7%* Marginal Tax rate far worker on the Average Wage 0 T 6 rate

+Anou3lised

NTA Performance

$0.00Jhxn-99 Oec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 3un-03 Dec-03 Jun-04

sssssssapfwifWsc} to MTA - RHS -""•—-Share Price - LHS ° - " NTA (post tax) - WS

page 11 of XOO Copyright © 2004 by Aegis Equities Holdings Pty Umited. At) RJghts Reserved.

Measuredfay Performance

Usted Managed Investments Review August 2004

Aberdeen.UtEiyiVWttUAT

Listed Investment Company

Investment Assets

Listed Companies

Investment Area

Ausbslia

Investment SectorsDiversified

Company DetailsALR is a Listed Investment Company that manages a portfolio of shareswithin the S&P/ASX200 Index. The Company is managed by AberdeenAsset Management Ltd, a global investment group with A$55b uncfermanagement. ALRJs the only LIC on the ASX with a significant level ofgearing, with a $50m gearing facility.

Board

B Shemnan, D Elsum, C Macrae, N Miles

Investment PhilosophyAberdeen believes that fundamentals provide the basis for long-termperfonnance. Aberdeen believes that their competitive advantage is theiron-going fundamental research and regimen of company visits.

Style and Process

The manager is an active, bottom up manager whose style can becategorised as 'Growth at a Reasonable Price' fGARP').

The manager filters the Top 200 stocks, iniUaliy by 'quality' where factorssuch as core franchise, earnings growth, management and balance sheet:are considered. Price considerations are then taken into account/ includingvaluation (PE, price/cashRow, net asset value) industry comparisons andforward modeling of projects. All inputs are internally generated. Themanager has an absolute return focus, rather than a benchmark focus, inthis company, so that weightings of stocks may not be linked to the index.Portfolio construction has a number of wide guidelines including a balanceof large and mid cap stocks are held, stock exposure Is held at betweenzero and benchmark +15% and indusby exposure is between zero andbenchmarte+20%. Up to 10% of a stack's capital can be held. The resuIHngportfolio holds between 20 and 40 stocks. Turnover is low, with the averageholding period of stocks being around four years.

Investment Team

Steven Robinson, B.Sc.,Grad Dip Mineral Eco/ ASIA. Head of AustralianEquities. Eight years investment experience, six at Aberdeen.

Munib Hadni, CFA, B.Bus. (Hons), LLB. Portfolio Manager. Ten yearsinvestment experience, all at Aberdeen.

Maria PapaUianasiou, CFA, B.Comm, B.Sc fiSlA. Portfolio Manager. Eightyears investment experience, six at Aberdeen.

Michelle Cassis, BAppFin BCom, Graduate Investment Analyst. Joined 2004.

Aegis Comments/\LR has experienced a number of changes in the recent past. The managernegotiated a lower management fee, with ?e introduction of a performancefee and a change in investment mandate firom a universe of the ASX50 tothe ASX200 in February 2004. The combination of a 'GARP' style, aconcentrated portfolio and gearing means that this LJC should beconsidered one of the more aggressive vehicles available on the ASX. Itshould ou4>erform during rising markets.

Key investment information

RATING

Price ($}

NTA fax adj. ($/share)

Market Cap ($m)

Fully Diluted Shares (m)

Turnover ($M pa)

12 month l/H ($)

Listing Date

HOLD

$1.05

$1.14

61.5

52.2

28.7

0.84 - 1.07

1987

Management Expense Ratio (HER)

Base Case MER* (%) l.OS

MER 5% Outperf.* (%) 2.05

* Assumes 10%retum for Ati Ords, S% for Bonds.

Performance Anatytics

S&P/ASX200 Ace

lYr

All Ords Ace

3YrIVr3Yr(pa) *" (pa)

Excess Perf. (%) -0.62 -1.87 -2.25 -3.19

Sets 0.69 0.97 0.69 1.00

TE(%) 3.45 3.02 3.46 3.08

IR -0.62 -0.62 -0.65 -1.03

Substantial shareholders (Va)

Sherman Group 20.62

Wflson Leaders Ltd 10.28

above (nformaHon as at 30 June 2004

Dividend Yield (Vo)

FY02 FV03 FY04

5.4ff 2,3fF 4.8ff

Dividend yield on share price

Company Contact

Brett 3o)l)ebrettjoilte@3berdeen-asset.com.au

61 2 9950 2846

www.aberdeenasset.com.au

page 12 of 100 Copyright © 2004 by Aegfs Equities Holdings Pty Limited. AH Rights Reserved.

Measuredby Performance

Sector

Diversified Financtals

Industry 6roup

Diversified Finandals

Industry

Capital Markets

Sub Industry

Asset Management& Custody Banks

Aust Eqyltites 99%

Size Weighting (Equities)

Small Micro

Sector Weighting (Equities)

EnagyBi

Teko wawe£

aiT-11%,

Industrials

4%f Other/'" 0%

Finandals •x Prop35%

Materialsi - B%

Property5%

above lirfonnation as at 30 June 2004

Other Data

Options:

Dividend policy:

Capital managementpolicy:LIC tax concessions?

DRP Available:

None on issue.

ALR wishes to maintain a dividend of lcent perquarter fully franked in the short-term.

ALR is currentfy undertaking a buy back of up to10% of issued shares, at the disaetian of the Board.

Yes.

Yes, at a dtscount of 2.5% to market price.

ALR's Portfolio (Top 10)

Prem/Oisc

Portfolio S&P/fSKCode

ANZQBEWBC

TCLFGLTABTLSUEIRIOCBA

(<?)7.9

7.9

6.7

6.4

5.9

5.3

4.7

4.3

4.1

3.9

57.1

200 Ace (%)4.9

1.3

4.6

0.8

1.4

0.3

4.6

0.2

1.7

6.1

25.9

P/E(X)

10.7

11.6

11.0

14.1

16.5

19.4

13.7

1S.5

12.3

11.9

12.4

Yield EPS Grth(%) target (*%>)

6.1

4.6

5.6

5.1

4.3

4.3

5.7

4.0

2.9

6.1

4.0

6.9

10.8

10.2

4.6

12.5

12.6

6.7

-19.4

51.7

24.0

-13.5

-12.6

-18.1

Z.8

-4.3

5.0

-6.8

0.0

-4.6

-1.4

Tax Based Returns

r® Tax (0%)Super Fund (15%)AWOTE* (30%)Max Tax Rate (48.5%)

Fund

tYr

31.2%

29.8%

28.1%

26.7%

3Wr+

5.9%

4.9%

3.8%

2.8%

lYr

23,2%

22.2%

21.1%

20.1%

8.7Portftllo as at 30 June 2004

All Ords Ace. j

IVr 3Yr*

23.9% 6.2%

23.0%

21.9%

3Yr+

5.7%

5.0%

4.0%

3.2%

5.4%

4.5%

3.7%20.9%* Marginal Tax rate for woricer on the Average Wage 0 T E rate {

+Annualtsed{

NTA Performance

Sep-02 Apr-03

lP>emf(Disc) to NTA- RHS •Share pries. LHS NTA (f»S( tax)-LtiS

page 13 of 100 Copyright © 2004 by Aegis Equities Holdings Pty Umffied. A!) Rjghfcs Reserved.